Social Security's 2026 Cost-of-Living Adjustment (COLA) Is Shaping Up to Be a Lose-Lose Scenario for Retirees

Key Points

• The latest estimate projects a 2026 Social Security COLA of 2.7%.

• This increase might not be enough to offset the inflation retirees are experiencing, though.

• The COLA will also come after higher prices hit retirees' wallets.

• The $23,760 Social Security bonus most retirees completely overlook ›

Two months, give or take a few days. That's how much longer retirees must wait to find out how much their Social Security benefits will increase next year. But they can already get a sneak peek at the ballpark level to expect.

The Senior Citizens League (TSCL), a nonprofit organization that advocates for seniors, recently updated its projected 2026 Social Security cost-of-living adjustment (COLA). Unfortunately, next year's COLA is shaping up to be a lose-lose scenario for retirees.

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Losing scenario No. 1: The COLA isn't enough

Based on the latest data, TSCL estimates that the 2026 COLA will be 2.7%, higher than this year's increase of 2.5%. That might sound like good news to many retirees, but the COLA might not be enough to offset the corrosive effect of inflation on their Social Security benefits.

This isn't a new problem. Many experts have criticized the way Social Security COLAs are calculated for years. Their main gripe is that the inflation metric used to determine the adjustments. That metric -- the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) -- doesn't give as much weight to expenses incurred by seniors more than younger Americans (such as healthcare) as much as it should.

TSCL's 2025 Senior Survey found that 94% of respondents believed the 2025 COLA of 2.5% was too low. Based on their personal experiences with higher prices, 80% of seniors thought that inflation last year was 3% or more.

The gap between the amount of the Social Security benefit increase and inflation experienced by seniors could get worse. The inflation metric used by the Social Security Administration (SSA) to calculate the annual COLA might not be as reliable as it has been in the past.

Why might this be the case? The U.S. Bureau of Labor Statistics (BLS), which determines the CPI-W for each month, has scaled back how much data it collects due to a staffing shortage and hiring freeze implemented by the Trump administration. Some economists outside the government are concerned that these changes could affect the quality of BLS inflation numbers, which would in turn affect the COLA calculated by SSA.

Losing scenario No. 2: The COLA comes too late

Let's suppose, though, that the 2026 COLA does accurately reflect the inflation experienced by seniors. Would retirees be in great shape with their benefit increase, whatever it might be? Not really. There's another problem with the COLA.

This issue is all about timing. And again, it's nothing new. The COLA always comes too late to offset Social Security recipients' higher costs.

For example, assume that the actual inflation you experience in 2025 is 2.7%. To keep things simple, let's say that the price of every product and service you pay for rises exactly 2.7%. In January 2026, you get a 2.7% COLA.

Here's the problem: The "raise" you receive comes after you fork out more money on all your purchases. In other words, you've already felt the sting of higher prices without the offsetting benefit increase.

This problem could also be worse with the next COLA. The annual adjustment is based on CPI-W numbers from the third quarter of the year. However, the higher tariffs put into place by the Trump administration could have a greater effect on the prices paid by consumers in the fourth quarter than in the third quarter.

How to win in retirement

With the 2026 Social Security COLA's lose-lose predicament, is there any way to win in retirement? Yes, but the way to do so might not be viewed favorably by many retirees and could be out of reach for some. The best way to minimize the impact of potential problems with the Social Security COLA is not to depend on Social Security as heavily for retirement income.

For anyone who hasn't retired yet, the smartest way to achieve this goal is to save more in IRAs, 401(k) plans, and other tax-advantaged retirement accounts. For those who have already retired, though, reducing reliance on Social Security isn't as straightforward.

Some could withdraw more from their other retirement accounts to compensate for shortfalls in the COLA. The risk, though, is that this approach could deplete those accounts sooner than they would like. Another possibility is to work part-time to supplement Social Security. However, this won't be a viable option for everyone.

There is at least one bright spot: Any benefit increase is better than none at all. Unless a steep decline in inflation occurs over the next few months (which is highly unlikely), retirees can at least count on receiving some extra money to help offset the higher prices they're encountering.

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